After lowering its prices by 20 percent, a manufacturer finds that the quantity demanded increases by 10 percent. The elasticity of demand for this firm is 2.

Name: After lowering its prices by 20 percent, a manufacturer finds that the quantity demanded increases by 10 percent. The elasticity of demand for this firm is 2.
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Question

Quizplus · Accepted Answer

The elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, it would be 10% / 20% = 0.5.

After Lowering Its Prices by 20 Percent, a Manufacturer Finds